Currency

The whole purpose of shipowners arranging to carry goods in their vessel(s) is to earn sufficient income to operate their enterprise successfully and, hopefully, to make a profit. Charterers, on the other hand, are anxious to move their cargoes at the lowest possible unit price commensurate always with safe delivery. It follows, therefore, that close attention must be made in all shipping contracts, not only to the amount of income involved and to its calculation, but also to the methods and times of payment, and to the various risks of the parties involved. Currency: In most cases, freights are paid in United States dollars – the currency of international shipping – but this is not always the case, particularly for short-sea and coastal shipping where local currencies applicable to the trade are frequently used. Risk of loss of Freight: Usually the occasion on which freight is deemed to be earned is specified in the contract of carriage, otherwise it is legally construed as ‘a reward payable upon arrival of the goods at their destination, ready to be delivered in merchantable condition’. Freight would then be payable concurrent with delivery of the goods at the discharge port(s), and a consignee would not normally be entitled to take delivery of the goods until the freight had been tendered. It follows that, unless otherwise specifically agreed, the risk of losing the freight before safe delivery of the cargo falls upon the carrier or shipowner. The party at risk should therefore prudently seek cover against potential loss of cargo (and therefore of freight entitlement) from the insurance market, where freight insurance is normally available at a modest premium, adjusted by the risks involved such as age of ship, duration of voyage, etc. Frequently, however, shipowners negotiate that freight ‘deemed earned upon loading’ or ‘freight payable on shipment’, in which case the risk of losing the cargo and being liable to pay freight (even without receiving the goods) becomes that of the charterer, who is left to make appropriate insurance arrangements instead of the shipowner.